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Apple: A Quick Take on Take 2

A Quick Take on Take 2

At the Macworld Expo in San Francisco, Apple today announced two updates to its digital video strategy. First, iTunes will now feature movie rentals as opposed to just download-to-own videos. iTunes’ users will be able to rent library titles for $2.99 or new releases for $3.99. As well, high-definition rentals will be available for $3.99 and $4.99. As with other online movie rental services, renters will have 30 days after purchase to begin viewing the movie, with 24 hours thereafter to watch the movie. According to Apple CEO Steve Jobs, every major studio is contributing content and the movies can be viewed on PCs, Macs, iPods, iPhones, and on TVs equipped with Apple TV.

The second announcement was an update to Apple TV (“Take 2” as Jobs called it) that eliminates the need for a PC to be part of the platform chain. While Apple TV can be networked with a PC, it will now operate as a stand-alone platform that can connect directly to the Internet and enable movies to be discovered, downloaded, and viewed without the need for a PC proxy. Existing Apple TV owners will be able to download a free software update while new buyers will pay $229 for the platform, down from $299.

Jobs noted that many of today’s online movie models have “missed” on this critical point, requiring the presence of a PC to support or serve video to the TV. “Yes, it’s important to make the Internet-to-TV device chain as simple as possible and removing the PC from the equation certainly succeeds in accomplishing this objective,” noted Michael Greeson, president and principal analyst for TDG. “Simplifying the on-TV discovery and purchase process, however, is just as important. Apple has a lot of work to do to in this department, especially when compared to new services such as Vudu.”

Adding movie rentals and lowering the entry costs, said Greeson, are both prudent moves for Apple. “Apple’s end game is to establish a proprietary foothold on the living room TV and only way to make this happen is to offer services which compete directly with incumbent PayTV video-on-demand and pay-per-view services, models which rent movies on subsidized set-top boxes. Adding movie rentals and lowering the price of Apple TV will help, but it still begs the question as to why a consumer would choose to pay $229 for a device that simply replicates an existing experience. If Apple can deliver a living room experience that transcends what incumbents provide, then maybe the $229 price will be worth it to some consumers…maybe. What Apple really needs to do is eliminate the upfront costs of the box (which is heresy to a company like Apple) or at least give buyers a couple hundred dollars i n free movies to make up for their upfront investment. Only then will this kind of service is going to reach more than early adopters and Apple fanatics, at least in today’s marketplace.”


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